Table of Contents
What is time-barred debt?
Time-barred debt is debt that collectors can no longer sue you for. Debt reaches this state after a certain number of years. When this happens, the debt is said to have passed its “statute of limitations,” which is a time limit on how long creditors are allowed to file lawsuits over unpaid debt. 1 2
Your debt won’t necessarily be erased once the statute of limitations expires. In most cases, you still owe time-barred debts, and they can still appear on your credit report—your creditor or debt collector just has less power to compel you to pay them. 1 3
When does the statute of limitations on debt begin?
In some states, the time limit on the statute of limitations is counted from your first missed payment towards your debt. In other states, it’s counted from the most recent payment you made. 2
There are several ways that you can accidentally reset the statute of limitations, which vary from state to state. In most states, it will reset if you make a partial payment or acknowledge in writing that you owe the debt. 1 4
Doing any of the following can also reset the statute of limitations:
- Accepting a debt settlement offer
- Starting a payment plan
- Agreeing to pay off some of the debt
- Making a new charge on the credit account in question (in the event that your creditor hasn’t closed the account yet)
If you’re not sure whether your debt is time-barred or not, check with a lawyer to find out exactly when the statute of limitations started and how to avoid resetting it. 5
How long can a debt collector legally pursue old debt?
How long a debt collector can legally pursue old debt depends on the state you live in and whether they’re threatening legal action to do so.
In almost all states, debt continues to exist even after the statute of limitations renders it time-barred. It’s legal for debt collectors to keep contacting you about time-barred debts by mail or by telephone in nearly every state (except Mississippi and Wisconsin). 3 6
However, regardless of whether your state allows debt collectors to contact you after the statute of limitations expires, they cannot take (or threaten to take) legal action to collect time-barred debts.
What determines a debt’s statute of limitations?
The statute of limitations on debt can vary widely. It’s often between 3 and 6 years, but it can be as long as 15 years in some states. 3
The statutes of limitation for a given debt depends on: 5
- What type of debt it is
- The state you live in (if you’ve moved, your current state is the one that’s relevant, not the state where you originally incurred the debt)
- What state law (if any) was mentioned in your credit agreement
The statute of limitations can also be affected by the specific terms in the contract you signed with your creditor.
You can contact your state Attorney General’s office to find out about the statute of limitations where you live. Because it depends on many factors, be as specific about your debt as you can when you contact them.
What should you do if a collector asks you to pay time-barred debt?
If a collector asks you to pay a time-barred debt, before doing anything else, exercise due diligence by asking them for written verification. There’s always a chance that they have the wrong number or are confusing you with someone else.
The collector is required to send you a debt validation letter within five working days after they contact you about the debt. This letter should include the amount of money you owe, the date of your last payment, information about the collector and creditor, and steps for you to take if you don’t believe it’s your debt.
Once you’ve received a debt validation letter from your debt collector, you have four options:
1. Ignore the debt
You can’t be sued over a time-barred debt. This means you can ignore it since your debt collector has no way to compel you to pay.
However, they might continue trying to collect the debt by phoning you or sending you letters or emails. As mentioned, they can legally do this in every state but Mississippi and Wisconsin.
They may also resell your old debt to another debt collection agency as long as it hasn’t been extinguished. 7
The upshot is that, while you’re free to ignore your debt, you may continue to receive phone calls and letters about it—potentially for years. If that’s unacceptable to you, you need to pursue one of the alternative methods of dealing with it.
2. Dispute the debt
If a creditor or collector contacts you about debt (time-barred or otherwise), you can dispute the item on your credit report if you believe:
- It belongs to someone else
- You already paid it off
- It’s fraudulent or the result of identity theft
- It’s invalid for any other reason
If you intend to dispute the debt, you must do so within 30 days of the debt collector contacting you. After that, they can legally assume that the debt is valid, and challenging it will become much harder. 8
To dispute a debt, you should write directly to the creditor or collector. Your letter must state why you believe the debt is invalid, and you should ask for verification of the debt. Provide any documentation that you have proving that you don’t owe it.
Does disputing a debt restart the statute of limitations?
No, disputing a debt doesn’t restart the statute of limitations. In most states, the statute of limitations resets if and when you make a payment towards the debt or acknowledge that you owe it.
3. Repay the debt
The major advantage of repaying your time-barred debt is that you won’t have to deal with debt collectors bothering you any longer. (And depending on the circumstances that led to you incurring the debt, paying it might clear your conscience.)
If you decide to go ahead and repay a time-barred debt, you need to be careful. If you make a partial payment, the debt will become active again, and your debt collector will be able to sue you for the remaining amount. 5 9
Make sure things are clear between you and your creditor about your payment plan. Get a written agreement before you make your first payment specifying:
- Exactly how much you’ll pay
- That your debt collector will forgive the entire debt immediately after receiving payment
Without getting an agreement like this in writing, the collector may later decide to pursue you for the remaining amount, or even sell it to another debt collection agency.
Settling your debt by making a partial payment
In addition to the original sum of money that you borrowed, old debts accumulate collection fees and penalties as permitted by the law or the original contract you signed. 1
If you decide to repay the debt, you don’t necessarily have to pay the full amount that you owe. Your debt collector may be willing to forgive the debt in return for a partial payment. This is known as debt settlement (or, in the case of credit card debt, as credit card debt forgiveness).
Be aware that even after paying your debt, it will remain on your credit reports, which means that repaying might not directly benefit your credit score. In fact, debt settlement can actually damage your score because the credit bureaus (and the scoring companies, FICO and VantageScore) want to incentivize people to pay off their debts in full.
Whether you make a partial or full payment, think carefully about whether repaying your time-barred debt is the right choice.
4. Declare bankruptcy
If you want to stop companies from chasing you over time-barred debt but you’re financially struggling and have no way to pay them, you can declare bankruptcy. This will end their debt collection efforts.
In most cases, declaring bankruptcy over time-barred debt isn’t worth it. However, if you declare bankruptcy for other reasons (e.g., you have other, more recent debts that you’re trying to get discharged), your time-barred debts may also be cleared.
If you do choose to declare bankruptcy, make sure you know the difference between chapter 7 and chapter 13 bankruptcy and understand how long bankruptcy will remain on your credit report.
What to do if you’re sued for time-barred debt
Legally, collectors cannot sue you for a time-barred debt. However, they still might try.
If this happens, the money you owe could be taken through measures like wage garnishment, and you might no longer be able to dispute the debt. In a worst-case scenario, you might even be held in contempt of court for failing to appear, which is one of the few remaining ways that you can be sent to jail over debt.
Respond quickly to any notices you receive, and consider contacting an attorney. If the case goes to court, be ready to provide documents proving that the debt is time-barred. This should get the case thrown out.
Can I sue creditors for trying to collect time-barred debt?
You can also sue debt collectors if they violate your rights, abuse you, or harass you while trying to collect the debt. 14
If you think that you’ve been a victim of unfair or unlawful debt collection practices, you can file a complaint with the Federal Trade Commission, the Consumer Financial Protection Bureau, or your state Attorney General’s office.